Mortgage brokerage agreements protect buyers from fraud. When you buy a house, most people don`t pay in cash. Instead, they finance most of the real estate purchase with a mortgage. You can choose to go directly to a bank or mortgage lender for a mortgage or use a mortgage broker to buy interest rates and credit products. To avoid fraud, states require mortgage brokers to enter into original mortgage credit contracts, commonly referred to as mortgage brokerage contracts, before accepting fees. The written brokerage agreement must clearly state the services provided by the mortgage broker, the terms of the original fee and the dollar amount that the mortgage broker must receive as a credit fee. In most countries, a mortgage broker can only charge one application and third-party fees — valuations, surveys, credit reports — before a qualified lender approves a home loan. If the mortgage broker receives a commission or inducement from the lender in addition to the original fee, the mortgage brokerage contract must clearly state that compensation, amount and purpose. Legally, anyone who uses a mortgage broker instead of a direct lender to buy a home must enter into a fully executed mortgage brokerage contract before the broker can assess the original fees.
State laws prohibit a potential buyer from paying an origination fee to mortgage brokers unless there is a written mortgage brokerage agreement between the two parties. The brokerage contract must be signed and dated by the home buyer and the mortgage broker or the director of the subsidiary when the broker works for a mortgage brokerage company. Many people go directly to a particular lender to get a loan, such as Wells Fargo Home Mortgage or SunTrust Mortgage. However, other potential buyers use mortgage brokers — independent contractors who work alone or for a mortgage brokerage firm representing credit products for different lenders in order to get the best deal for their clients. Mortgage brokers refer to many of the loans provided by large mortgage lenders. For example, Wells Fargo provided more than 20 percent of mortgages in the U.S. in the second quarter of 2013, although much of that percentage came from mortgage brokerages. Anyone who uses a mortgage to buy a home must go through the original credit process.